Legislative panel discusses Ore. sales tax measure

SALEM, Ore. (AP) -- Oregon voters have rejected a sales tax nine times in the past eight decades. Some in the Oregon Legislature hope the 10th try will be the charm.

A state Senate committee on Monday discussed a resolution asking voters to create a 5 percent tax on goods and services as part of a proposal to overhaul Oregon's volatile taxation system. A sales tax would be accompanied by a cut in income taxes and other revenue sources.

Proponents say they're starting a discussion and don't expect the Legislature to put it on the ballot this year.

Nearly 70 percent of state government revenue comes from the personal income tax, which rises and falls sharply with the economy. Supporters say a sales tax in conjunction with other changes to the tax code would diversify Oregon's revenue sources and make the system more stable.

"It's time for a full-scale, top-to-bottom restructuring of our tax scale," said Sen. Mark Hass, D-Beaverton.

Some critics say a sales tax would harm low-income taxpayers, who spend a larger share of their income on consumption. Others say Oregonians of all incomes already pay too much in taxes.

The plan was put forward by three Democrats: Hass, Sen. Ginny Burdick of Portland, and Rep. Tobias Read of Beaverton. It would reduce property and income taxes, and create new tax credits aimed at business investment and low-income workers.

The proposed sales tax would go farther than most others states with consumption taxes, assessing services, not just tangible goods. Supporters say taxing services would make their plan more equitable because higher-income taxpayers spend more money on services.

Separately, Gov. John Kitzhaber is working with business groups and labor unions in an attempt to craft a tax-system overhaul that both groups — and their formidable campaign machineries — could get behind. The group is working with political consultants to take the temperature of the electorate and could produce a ballot measure for 2014 of 2016.

Kitzhaber, a Democrat, said lawmakers first need to address the rising cost of prisons and pension benefits for retired government workers.

"I think it's going to be difficult to convince people to support generating significant new tax revenues when a significant portion of that isn't going to go into the classroom, isn't going to important public services," Kitzhaber said.

The governor didn't take a position on the legislators' proposal and was careful to point out that it's too soon to know whether a sales tax would be part of a tax overhaul that reaches the ballot.

Sen. Larry George, R-Sherwood, said voters need confidence that the Legislature won't let spending grow unchecked. He suggested the proposal include some form of spending limitation to boost voters' confidence with the plan.